Have you heard about ‘Assurance Vie’ in France and wondering what it is about? Why so popular in France? Is it a life insurance or an investment account? What are the tax advantages? Is it good for foreigners and expats to open one?
This blog intends to answer these basic questions about an ‘Assurance Vie’ in France based in our own experience and knowledge. Let’s start!
Table of Contents
What is 'Assurance vie' in France?
It is a wrapper or envelop that allows you to include within a large number of underlying investment products (also known as an investment Swiss knife), with tax and inheritance efficient conditions.
Almost every family in France has an AV. It is a well-known and popular investment. The secret of its success is because it answers 2 main needs for French: tax optimization and low risk investment.
French are obsessed with paying less taxes. It is normal considering the high rates in the country, specially when it comes to inheritance. Depending on each individual case, the government can tax up to 60%!
Another attractive point for AV is the ability to invest in ‘Fond Euros’, which is euro fixed-income fund. These funds typically invest in fixed-income securities such as government or corporate bonds denominated in euros. The aim of these funds is to provide investors with stable returns while preserving their capital.
Is it worth it to open an 'Assurance Vie' in France for foreigners?
Let’s make it easy for you. If you answer yes to these questions, you may want to open an ‘Assurance Vie’ in France:
- Are you paying taxes in France?
- Are you planning to stay in France for more than 8 years?
- Are you looking for an investment solution to secure transmission of wealth to special beneficiaries under tax favorable conditions?
If you answered NO to the above questions you may want to have a look at a different investment wrapper such as the PEA (Plan d’Epargne Actions) for tax exempt investments, or simply an standard broker account (known in France as CTO – ‘Compte Titres Ordinaire’).
So, what are the benefits of an 'Assurance Vie' in France?
- Tax efficient: After 8 years holding period, your capital gains and dividends are reduced (from 12,8% to 7,5%), but social contribution tax is still due (17,2%). After this period, you can access 4600€ of gains tax free each year. Notice you can withdraw your money (no penalties, but fully taxed) in less than 8 years.
- Unlimited: Opposite to PEA, there is not limit on your deposits.
- Inheritance flexibility: You can decide who will get your estates when you die. In France, there are succession laws deciding how your wealth will be distributed when you pass away. So having an AV gives you the power to decide your will and your heirs will get favorable tax conditions on the capital inherited.
- Investment flexibility: you can put within an AV almost any kind of investment product in the market such as stocks, mutual funds, ETFs, SPCI, etc. That’s why it is called the Swiss knife for investment.
- Availability: Your capital investment remains available (even if less than 8 years), but no tax advantage for early withdrawals.
What 'Assurance Vie' to open in France?
Fully online 🙂
There are many AV contracts in the market. Most probably your own bank has already offered to open an AV with them. However, the best are specialized online investment companies, as they propose a wide range of options with small fees.
A well known online bank in France is ‘BoursoBank‘. We use it ourselves and we like its simple interface, reduced fees and the fact that they belong to a large french bank (Société Générale). Open an account and get benefits by using our sponsored link (code ZECO5750).
Corum Life is another AV we use as they are invested in real estate assets and private debt. You can use our sponsored code OWQV68 to get benefits when opening an account with them.
There are other well known players in the market. Yomoni and Nalo are well known by their managed funds. These companies are ideal for those who want to delegate investment decisions – hands free style.
Classic bank 🙁
Opening an AV with a ‘classic’ bank could be ok if you want to keep things simple and avoid dealing with many platforms. However, this could be costly in the long term.
Most of the classic banks are having limited offer and high fees. Even though fees may seen low (1%, 2%..) there are everywhere! Entry fees (just to deposit the money), maintenance fees, transfer fees, etc… All added up, makes a huge difference in the long term.
Not only fees, but they propose very limited options to invest in. They will normally promote their own funds (which normally under perform the major stock indexes).
At the beginning of our journey in France, we were not sure about the length of our stay in this country. Hence, we were not looking for long term investments. As time passed, we decided to understand better this kind of investment.
Honestly, it took long time for us to be convinced of opening an AV (compared to a PEA for example), but finally we decided to give it a try as part of our wealth transmission planning.
We hold a very small % of euro funds within our AV, as can deal with higher risk investments and we are looking to get higher return than the inflation. Therefore, we are mainly invested in diversified funds, SCPI and ETFs.
Finally, we invite you to read the official French Government web site for more details.
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Please remember that we are neither financial nor tax advisors. We are just sharing our best understanding based in our own experience. This blog is for educational purposes only. Do not make investment decisions solely based on what you read in this blog. What works for us, may not work for you. Do your own research and look for professional service if required. Read our full disclaimer in the ‘about’ page.